N.J. SC finds in favor of newspaper in defamation suit

Jessica M. Karmasek Mar. 8, 2012, 1:59pm


TRENTON, N.J. (Legal Newsline) - The New Jersey Supreme Court ruled last month that there was not "clear and convincing" evidence that the editor of a regional weekly newspaper knowingly, or in reckless disregard for the truth, published a false front-page teaser.

The Court, in its Feb. 28 ruling, affirmed the decision of the state's appellate division, which found there was not "clear and convincing" evidence of actual malice to warrant a jury trial on defamation or false light.

In November 2005, the Securities and Exchange Commission filed a complaint in the U.S. District Court for the District of Connecticut against Ronald Durando and Gustave Dotoli, residents of Nutley, N.J. They were charged with various violations of federal securities laws.

In particular, the complaint alleged Durando and Dotoli engaged in a fraudulent "pump and dump" market manipulation scheme and, through it, allegedly gained more than $9 million in proceeds from illegal sales of essentially worthless stock.

The SEC charged the two men with illegal insider trading, filing reports containing false and misleading statements, and other violations of federal securities laws.

On Nov. 17, 2005, The Record, a newspaper owned by North Jersey Media Group, published an article written by staff reporter Kathleen Lynn about the SEC complaint. The headline of the article read, "3 N.J. men accused in $9M stock scam."

Neither the SEC complaint nor the article suggested that Durando and Dotoli were arrested.

The North Jersey Media Group also owns The Nutley Sun, a local weekly newspaper.

The executive editor of The Nutley Sun, Paul Milo, received permission to reprint Lynn's article.

On Dec. 5, 2008, Milo prepared the article for publication in The Nutley Sun's Dec. 8 edition -- a promotional issue circulated to 2,500 non-subscribers in addition to the weekly's regular subscribers. Milo wrote a new headline for the article, "Local men charged in stock scheme."

The next day, Milo composed three "teasers" for the front page of the Dec. 8 edition, referencing different articles within the newspaper. The teaser for the reprinted article read, "Local men arrested in 'pump and dump' scheme, page 11."

The teaser did not mention the names of either Durando or Dotoli.

Like the original article in The Record, the reprinted version did not suggest that the two men were arrested.

The day after publication, an attorney for the two men sent an email to The Nutley Sun pointing out that his clients had not been "arrested." The plaintiffs' counsel, at that time, demanded a retraction and threatened to file suit.

After a back-and-forth email exchange, on Dec. 19, Jennifer Borg, general counsel to the North Jersey Media Group, approved the filing of a retraction. It was published in boldface and large print on the front page of The Nutley Sun's Dec. 22 edition.

This edition, however, was not circulated to the 2,500 non-subscribers who received the Dec. 8 edition with the incorrect teaser.

At this point, the plaintiffs' counsel already had filed a lawsuit -- on Dec. 16 -- alleging that the defendants, The Nutley Sun and North Jersey Media Group Inc., had committed libel.

The plaintiffs sought compensatory, emotional-distress and punitive damages.

A trial court granted summary judgment in favor of defendants on all claims and dismissed the complaint.

In an unpublished decision, the appellate division affirmed, saying the "careless and unfortunate" use of the inaccurate word "arrested" was not enough to satisfy the legal and constitutional requirements for liability.

The state's high court granted the plaintiffs' petition for certification.

Justice Barry T. Albin, writing for the majority, said the case "unquestionably" involves "sloppy journalism."

However, the "careless acts of a harried editor" and the summary judgment record before the Court did not support a finding that the editor knowingly disregarded the truth in publishing the false teaser, he said.

"Although the reckless-disregard-for-the-truth prong has been defined in a variety of different ways, the core principle has remained constant: establishing reckless disregard requires a showing that the defendant made the statement with a 'high degree of awareness of (its) probable falsity,'" Albin wrote in the majority's 30-page decision.

"The test is subjective, not objective, and involves analyzing the thought processes of the particular defendant."

In this case, the editor, Milo.

"One does not have to condone Milo's shoddy editing to understand how he might have made the mistake in preparing the teaser, a day after he had read Lynn's article. Clearly, the article spoke about the civil complaint filed by the SEC against Durando and Dotoli, and Milo knew the difference between civil and criminal actions. But the language of the SEC complaint, as reflected in the article, also bespeaks criminality," Albin explained.

Importantly, plaintiffs are not named in the teaser, the majority noted.

Justice Helen E. Hoens filed a separate, dissenting opinion, in which Justice Jaynee LaVecchia joined.

In their 18-page dissent, the two justices said the majority "misperceived" the relevance of including such a falsehood in a front-page teaser and has effectively created a new standard for protection of journalistic practices.

"Today's majority opinion creates a new approach, one that will completely shield a newspaper if the author or editor responsible for publishing the defamatory falsehood simply has the presence of mind to say what amounts to magic words," they wrote.

"Any author who says he was busy, or pressured, or overworked and trying to meet a weekly deadline, and any witness well-coached enough to parrot the catchphrase of 'harboring no doubt' will find a safe harbor regardless of the falsehoods that have been published."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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